Big Biotech’s Missing Formula

In the past 5 years, the Nasdaq Biotechnology Index has outperformed the S&P 500 by nearly 100%, due to innovative health care products such as revolutionary oral cures for Hepatitis C, and new treatments for certain forms of cancer. But, since mid-February the index is down 20% as a consequence of lacking blockbuster drugs. This 20% plunge has caused big biotech stock prices to stall out.

The good news is, there is reason to believe this will be a onetime occurrence. In fact, the largest companies still generate a majority of the cash, which is used to raise stock prices. Unfortunately, if the shortage of proven drugs continues, biotech stocks won’t appeal to investors the way they have in recent years.